Category Archives: Business Strategy

Post navigation

Over at Barry Ritholtz blog I saw this video by Scott Galloway (at the Digital-Life-Design Conference) titled, The Four Horsemen – Amazon/Apple/Facebook & Google – Who Wins/Loses. Mr. Galloway is Professor of Marketing at NYU Stern School of Business where he teaches Brand Strategy and Digital Marketing NYU Stern School of Business, see his background here. In this presentation he packs a terribly insightful discussion into just fifteen minutes where he covers what he believes will be the advances and declines among the big four (“Four Horsemen”) of digital (and the convergence of retail) sales. Professor Galloway is quick to disclaim that any decline among these companies in no way means insignificant but rather, a shift in market share between four companies that hold a titanic share of the retail market.

A few high points from the discussion:

Amazon’s “race to the bottom” strategy where they then wait out the competition has an Achilles heel: shipping costs. The solution (or the future)? Fractional employment among the ranks of flexible employees such as Uber and Carpooling.com.

The trend of existing brick and mortar retail stores edging into the completion through the transformation of their retail locations into flexible warehouse fulfillment centers.

A few harsh words, matched off against some significant compliments for Facebook.

Key to Apple? It’s “self-expressive benefit.”

Finally, there was an unfortunate takeaway. The trend of Macy’s illustrates the further reduction of the middle class in America – “$40-60k jobs are giving way to $20-40k per year jobs” related to factory and fulfillment functions. So mid level service jobs are giving way to lower level service jobs, illustrating the point that even where there is job growth, no job is irreplaceable, which puts even more pressure on the individual to contribute value and if possible, make themselves indispensable.

When you think of the modern iteration of your local public library, a couple things might spring to mind, such as the perverts sitting at the computers offending everyone around them in the name of free speech. But another might be the question, how long can this model of an institution last? Well chalk one up for another blow to the hard and fast rule of disruption. I have observed the growing catalogue in recent years of digital material available for check out, including audio as well as e-books. But in the age of streaming versus download, the for-profit sector has started rolling out its own version of subscription based reading, and they face headwinds of an unlikely competitor, as noted in the Wall Street Journal, Why the Public Library Beats Amazon—for Now:

A growing stack of companies would like you to pay a monthly fee to read e-books, just like you subscribe to Netflix to binge on movies and TV shows. Don’t bother. Go sign up for a public library card instead. Really, the public library? Amazon.com recently launched Kindle Unlimited, a $10-per-month service offering loans of 600,000 e-books. Startups called Oyster and Scribd offer something similar. It isn’t very often that a musty old institution can hold its own against tech disrupters. But it turns out librarians haven’t just been sitting around shushing people while the Internet drove them into irrelevance. More than 90% of American public libraries have amassed e-book collections you can read on your iPad, and often even on a Kindle. You don’t have to walk into a branch or risk an overdue fine. And they’re totally free. Though you still have to deal with due dates, hold lists and occasionally clumsy software, libraries, at least for now, have one killer feature that the others don’t: e-books you actually want to read.

E-books you want to read? That’s right. So instead of an all-you-can-read list of digital titles with the equivalent of Smokey and the Bandit III, you have access to many of the titles from Amazon’s top 20 Kindle best-sellers of 2013 list with the following impressive results:

See the full grid from the WSJ article here. The article goes on to explain an interesting history of this windfall for local libraries:

How did library e-book collections get such a leg up? Amazon is locked in a hate-hate relationship with many publishers, so none of the five largest will sell their whole collection to Amazon for its subscription service…Over at the library, the situation is different. All of the big five publishers sell their e-book collections for loans, usually on the same day they’re available for consumers to purchase. They haven’t always been so friendly with libraries, and still charge them a lot for e-books. Some library e-books are only allowed a set number of loans before “expiring.”

There are obvious limitations to free services, such as availability, wait lists and time span for checked out materials. But for now, this is a terrific example of a public institution in the local community showing itself able to respond to disruptive forces, and provide viable resources to a wider audience with limited resources. It is also an excellent example of how a business model can benefit from adapting to a model that helps a local community as “publishers have come to see libraries not only as a source of income, but also as a marketing vehicle…since the Internet has killed off so many bookstores, libraries have become de facto showrooms for discovering books.” See brief overview here:

Team building is about leadership and discernment. Different strengths are needed at different times in a given context. This is why fit, among other qualifications is so important. But within any type of organization, there is the need for leadership who does not simply lead or direct, but develops cooperative participants. It is well established (and pretty much common sense) that a leader is going to build a team by outlining and inspiring vision, direction, and a cumulative goal. But what tools are effective for constructing and leading such a team, and what are the positive outcomes? Many a strong personality can cajole people into action, with dictatorial command from behind, or at the other extreme, running roughshod over people so far in front that team members are discouraged from participating. This of course is not team building at all. And the real loss is missing out on all the distinctive strengths and perspectives that each member of a creative and critical thinking team can produce together.

One author has suggested three skills to correct this error where the contributions of team members are not being taken advantage of: inviting genuine critical assessment and input without fear of retribution, receiving input while suspending judgment of it, and acting in a responsive manner to questions. Pretty simple, but requiring a great deal of confidence to implement. Leaders who do this though, will draw out ideas and creativity that people may not realize they had and find that motivation becomes less of an issue to try and generate and more of one to steer in the right direction.

“The only real mistake is the one from which we learn nothing” – John Powell

Right now the overall job market is an undeniable difficulty for us as a country. Thinking about this reminds me of a few things from some years back. The above quote causes me to reflect on a few difficult times and painful past lessons – experiences which are now filtered with hindsight (and the advantage of 20/20 vision as it were). But I am thankful for the experience of many of these difficulties, though some have taken years to get to that point. After one painful business experience in particular, I was encouraged by a friend (at a different stage in life and much more experienced than I) to journal out what I had learned. I remember that at that time, I didn’t want to hear of it, and I certainly didn’t want to talk about it, even alone within the very safe pages of a journal. All I could think about was the frustration I was experiencing from my own decisions, some of them hasty. But learning is an ongoing, dynamic process.

Sometimes, I believe, we don’t feel quite ready to learn from what we are presently going through. Which is part of the reason I am determined to learn from decades past, because our current problems span way beyond few years of misguided choices. I am optimistic too, because I think for many, there is an honest inquiry into present difficulties, and why past approaches may no longer be relevant. Ultimately, I want to be a better learner, and a better practitioner of that knowledge and experience.

Sometimes when I procrastinate, I find it is out of a sheer overwhelming sense of dread. This dread is knowing what needs to be done, and for whatever reason, perhaps outside pressure, truncated schedule, the mental or physical output of energy needed, or maybe all contribute to coming up with any and every rationale for not concentrating on the most important thing to be doing right now. An article that appeared in the Journal of Psychology from a decade ago asserts that this “self-regulatory avoidance reaction” or our inability to exercise the willpower or self-control needed to concentrate or direct our energies to the right task, is “core central to procrastination.” It is suggested that part of the resolution to procrastination is associated with understanding the behavior and then avoiding it. In other words, admit it with the intention of quitting it.

In my early college years, the need for self-control in time management was self-obviating, and I regularly admitted it. And the discovery of the to do list was nothing short of revelatory. This was first suggested to me by a professor my very first finals week when I was feeling a bit overwhelmed. The reasoning was, “get all these items you are thinking about ‘out of your head’ so you can concentrate on the most important task right now, then, move on to the next one and so on.” The very practical (and in some ways original work in modern time management), How to Get Control of Your Time and Your Life, outlines various tests and exercises for coming up with goals, objectives, and prioritization, and listing them out in different groupings, with each group having a special purpose, a similar method. Followed by the addition of monitoring safeguards similar to those set forth in the Journal of Psychology.

For everyone within the organization from the admin to executive leadership and everyone in between, these principals are important. But for the executive leader, self-control in one’s use of time has tremendous implications. And this is our leverage: prioritization, improvement and innovation for the purpose of actually working smarter, rather than longer and longer. It’s one or the other. I have observed many over the years who put in excessive hours and sadly, this does not automatically translate into a great team builder, great leader, or someone who really takes advantage of the of the resources available to them, just someone who seems to be defined by long hours. I have also worked in these environments and have put in excessive hours myself because the whole culture and system required it, and I really do not think it has benefited me at all, besides reinforcing my work ethic. Learning to leverage available resources (the most significant by far being people) is critical to success. Time has it’s limitations – 168 hours per week – leverage is potentially limitless. As Alan Lakein encouraged his readers forty or so years ago to answer, “what is the most important thing to be doing right now?” Stop procrastinating and do it now.

All roads lead to finance, budget, and even accounting, since accounting is the language of business. But why? Well, as one of the inimitable quotes from Jerry Maguire goes, “It’s not show friends. Its show business.” That’s another way of saying the objective, given the parameters of ethical behavior and all other social implications for your organization’s activity, is the goal of turning an honest penny. Once again, Nick Corcodilos (A.K.A., Ask the Headhunter) gets it right. And in his post, Stand Out: How to be the profitable hire, states it as follows, “Every job – every one – affects profit. Trouble is, few people (including employers) talk about it or even worry about it. That’s why we see layoffs and down-sizings.” Now it is certainly true, that some jobs and even entire divisions more directly affect profit than others. But again, all roads lead to finance (in terms of profitability [or for government, solvency]), and unfortunately, even those within finance operations often miss this point. It really boils down to the basic structure of an income statement (or statement of operations), that always tells us, revenue less expenses equals profitability.

In the same post, Nick goes on to write, “every job fits into one of the two terms [revenue or expenses].” He even suggest this as a focus in job hunting, “the effort to estimate a person’s role in profitability makes them stand out in job interviews. It makes them powerful candidates who show they care about the bottom line.” This is exactly what I believe should be emphasized, and what few focus on. Namely, answering the question, or better yet, presenting a business case describing what are you going to to do [i.e., what value are you going to add] in the future for this organization? I work in a profession that is obsessed with titles, as well as another frequent topic of Ask the Headhunter, previous salary – as if either of these things are predictors of whether a candidate is actually a fit in terms of leadership for that organization. Another thing that virtually all professional fields over emphasize, is what someone has done in the past. Although actual work performed is likely to be more relevant than actual title, it still does not answer the question, how are you going to contribute to this organization’s future success? And until you answer this question, the position may be one that represents a cost that can (or should) be eliminated. Think future, think value, think finance; all roads lead to it.

This month in the New Yorker, Jill Lepore has written an excellent (and lengthy) article, The Disruption Machine: What the gospel of innovation gets wrong. In it, the author has treated a subject that has been held up time and again during countless economic and technology discussions as the paradigm through which we are to view modern history: Clayton Christensen’s theory of disruptive innovation as summarized and popularized by his best-selling book From the 1990s, The Innovator’s Dilemma. Lepore has not only treated this subject in a very thorough manner, but you might say, used Christensen’s theory relentlessly as a chopping block, illustrating that it is fraught with truncated samples to support the theory, but more importantly, the theory itself fails time and again as a predictor of market trends. It’s one thing to point out flawed logic, as most any theory can be guilty of. But it’s much more problematic to demonstrate the failure of the theory to deliver on what it’s core principles are built around. Combine this with the frenetic activity in technology sectors that has put disruption on par with invention, and it would seem that a counterpoint to the current zeitgeist is both well-timed and much-needed.

I think much of Lepore’s treatment of the theory could be summarized in the argument that there is more interpreting of history using the disruption model than actual prediction, where people have not used the disruption model,

…to make accurate predictions about things that haven’t happened yet than because disruption has been sold as advice, and because much that happened between 1997 and 2011 looks, in retrospect, disruptive. Disruptive innovation can reliably be seen only after the fact. History speaks loudly, apparently, only when you can make it say what you want it to say. The popular incarnation of the theory tends to disavow history altogether.

I take this to mean that it is not as though disruption, as an independent action, does not occur as a part of the innovation, technology and general advancement of organizations and industries. But it is problematic to say that this is the model whereby you go about innovating: the way of destruction. Again,

The logic of disruptive innovation is the logic of the startup: establish a team of innovators, set a whiteboard under a blue sky, and never ask them to make a profit, because there needs to be a wall of separation between the people whose job is to come up with the best, smartest, and most creative and important ideas and the people whose job is to make money by selling stuff.

I think this is actually a fair assessment of much of the current state of being enamored with startups. I recall an interview where tech executive was questioned about the lack of profitability and future sustainability of one of the current social media giants. In a dismissive response, a comment was made along the lines of, “when you have millions of eyes on a service, how to make money is the least of your worries.” That illustrates a complete lack of real and essential business experience and leadership. But to the point, what exactly is [and you might go on to ask, is the value of] disruptive innovation according to Lepore? It is, “a theory about why businesses fail. It’s not more than that. It doesn’t explain change. It’s not a law of nature. It’s an artifact of history, an idea, forged in time; it’s the manufacture of a moment of upsetting and edgy uncertainty. Transfixed by change, it’s blind to continuity. It makes a very poor prophet.”

That is a rough assessment. And Dr. Lepore is even tougher on startups if you ask me. Again, I not only think this criticism is warranted, but a compelling argument. I’m just not quite certain that in spite of a few places where there is convergence of ideas, the author might be conflating two things that are still distinct: disruption and the spirit of startups in general. Regardless of your conclusion, this is a very well written argument that gives pause, and personally, as someone who continuously strives for organizational innovation, it’s likely to challenge a few core ideas.

Don Maruska and Jay Perry have written a very timely message to managers at all levels, as well as those aspiring to leadership and everyone in between. The book contains a timeless principle that relates to personal accountability and responsibility: do we frame the “story” of our professional lives by what is happening to us, or do you, as the title suggests, Take Charge of Your Talent? Having read this book I am writing this as a rhetorical question. But many readers who intuitively sense the premise of the book simple are not sure where to start. That is where many years of pioneering work in the field of coaching lend itself to this study. And best of all, it is written in a concise manner that includes depth of insight and prompts the reader to action.

In Take Charge of Your Talent there is a course mapped out that will have any motivated reader engaged, excited and challenged to take a healthy stretch. Yet the reader may also be surprised to find authors who suspend judgment and point out how to discover that many of the answers to moving forward are already available. In the chapters that follow, they offer helpful guidance and tangible steps to work toward attaining personal and professional desires and aspirations. One final note, if you simply read the book you will certainly benefit, but its purpose goes beyond that to the emphatically practical. This book really gets traction when you participate in the Talent Catalyst Conversation outlined throughout, so plan on this activity as you discover insights to help you and those around you move forward with your hopes.

When Moneyball was released few years ago, it popularized what Michael Lewis had researched and wrote about more than a decade ago with the subtitle, The Art of Winning an Unfair Game. Of course, those who read the book years ago realized what became so overwhelmingly popularized in terms of statistical analysis and the ultimately, the search for value. I think there is a real connection between this principle and the message of Benjamin Graham’s classic, Security Analysis first published in 1934, as well as many other lessons that can be applied to business and organizational leadership.

For me, Moneyball is a film you watch over and over for one reason or another. And there is a lesson I had not heard articulated (at least in this respect) that I found remarkable that took place in one of the final scenes. It speaks to the difficulty that all organizations face when there is the challenge of change taking place, which is pretty much the spirit of our age and for any foreseeable future. In a previous post I addressed the issue that all attempts at organizational innovation lead to: the difficulty of people adapting whether the motivation is fear, protection of turf, perceived livelihood or any other concern whether rational or irrational. I think the dialog is worth the price of admission:

In the industry where I work, a recurring theme is the application of change management, and how frequently it appears more difficult to make a best decision, versus being hamstrung by paralysis and resistance to moving forward. It might be tempting at times to think resolution is simply not possible. In other words, that things can’t change or will occur so slowly it won’t matter. But I don’t believe this, and I refuse to give in to this kind of cynicism that is right out of the Peter Principle. It is possible to be fresh, relevant, effective, adaptive to change and full of life at nearly any age, or stage of career, if the mental and physical health are present to do so. I am writing this as someone who is not a young person and I am more convinced of it than ever. Deficiencies or strengths in these areas are really matter of one’s determination to stay engaged and current (for whatever purpose or specialization) through continuous learning, then apply the mental energy to implement such things. Resistance to change can also be equally present in the young. We tend to miss this observation because frequently, age often compounds the problem of resistance to change, so we automatically conclude that one presupposes the other. But this too is simply not the case. A person can be narrow minded and adverse to innovation, technology, improvement and change at any age. This is a critical point of understanding for leaders since it is people who make up the team, and they are the leverage to accomplish anything.

In The New Leader’s 100-Day Action Plan, the authors discuss the importance of the “vision of building tactical capacity in a team” - that is, the ability to span between vision and execution, and the need for building loyalty, trust, and commitment. Tactical capacity is a tremendous discussion in itself, but I will limit the quote to a short, but excellent imperative for leadership,

[Tactical] capacity — this flexibility, energy, and skill — comes first from leadership. Your goal as a leader is to build it in each and every team member. This kind of leadership is far from intuitive. And the lack of it, in the end, is a fatal stumbling block for many leaders of new ventures. The entire process needs to be driven by an awareness of the kind of leadership that ensures success in the challenging circumstances of a transition.

This is great advice for accelerating a transition, but is is also guiding principle for ongoing process innovation of any kind. This will sometimes involve hiring and fully utilizing managers who are more skilled at given aspects of leadership and/or various areas of expertise than they are. Focusing on transformation and inspiration, and not being afraid of these skill sets, even if the senior manager does not fully understand them is key to personal and organizational success. Frequently though, there is a fear of competence, or what is simply a stylistic difference, which is rooted in human nature. The motivation could be jealousy, fear of being upstaged or even replaced. But the opposite should actually be true. If a senior leader has enough vision to identify the right talent, managing and implementing such people should only strengthen their position of leadership and produce the very best results for the organization. That is an expression of effective leadership.

A recent article in the Wall Street Journal reveals that, “Netflix is trying to better understand your binge-viewing habits.” Why? Because what was once thought to be an extreme lack of self-control, ranging to an aberrant use of time has now gone mainstream…and the company is even telling you you should not feel guilty about it! Or, for those among us who are seeking to justify such a use of time, Netflix says Americans are even willing to exercise while binging.

A phenomenon that is reshaping TV culture—viewers devouring shows in lengthy chunks, episode after episode. Executives say they found a strikingly consistent pattern in the pace at which people binge: In general, about half the viewers studied finished a season (up to 22 episodes) within one week.

According to the company’s news release,

“Our viewing data shows that the majority of streamers would actually prefer to have a whole season of a show available to watch at their own pace,” said Ted Sarandos, Chief Content Officer of Netflix. “Netflix has pioneered audience choice in programming and has helped free consumers from the limitations of linear television. Our own original series are created for multi-episodic viewing, lining up the content with new norms of viewer control for the first time.”

But why does this matter? It is not something so simple as being the first to market, but rather, a continued response to demand that keeps them in the position of market maker for streaming. Will we see a tiered approach to pricing structure? I don’t see how they can’t and there already seems to be evidence of this, but that is simply an appropriate response to continue its availability, and or desire to have it all.

A number of white papers on the topics of service and operational innovation have caught my attention, and I wrote an overview of one recently here. While many of the ideas regarding innovation are similar, the number of perspectives and expanded applications to operational innovation is impressive. As a proposed subspecies of organizational innovation, operational innovation has particular application for accounting and finance. And as such, it seems natural that information technology functions (up to a certain sized organization) commonly fall within the scope of the chief financial officer within the organizational structure. Why does this matter? Because what begins with a mindset toward innovation often requires the necessary bandwidth made available through technology.

In other words, technology in and of itself is NOT the answer. I cannot count the number of times I have seen an expensive system that was purchased in the absence of an organizational mindset that embraces and encourages innovation, and the inevitable happens: it lies dormant or is abandoned altogether. This is a particular shame because not only are resources wasted in the process, but it reinforces the mindset of those who are looking for an example of failure in order to resist change, as if change were being implemented for the sake of itself, rather than a desperately needed implementation that will move an organization forward. So the process begins with a mindset that permeates an organization, encouraging a culture of continuous learning. Although this is a simple and straightforward concept, it is far more complicated to create within an organization (of any type) than to plan.

But once this mindset is in place, or even moving in that direction through leadership or a core group of people, the possibilities for process innovation as it relates to service delivery are tremendous. In an article in Strategic Finance titled, Innovation is for CFOs, Too, the authors Davila, Epstein and Shelton suggest an integral connection to financial operations, organizational innovation and technology,

The accounting and finance functions are an important place to start. Although accounting has changed incrementally over time, we’re grounded in a model that was developed 500 years ago, and we still use that same basic model. That’s okay. The development of information technologies has changed the way we process transactions—and the speed—but the basic model hasn’t changed. Yet approaches to financing organizations and managing cash have changed dramatically over the years. Maybe most important, the role of the CFO has been totally expanded in the last decade or two. Although regulations in accounting and finance constrain some innovation in the corporate finance function, there’s still so much that can be done.

Further discussion of the “much [more] that can be done” will be in a subsequent post discussing this article, which can be downloaded from IMA here.